Strong earnings may retain investor confidence
ConocoPhillips (COP) might retain investor confidence because it showed relatively strong earnings and production growth in the first three quarters of 2014. One of the major reasons for this is the low break-even price the company enjoys. Break-even price is price required to cover total costs. At the break-even price, the company would make zero profit. ConocoPhillips’ break-even price is less than $40 per barrel, which allows it to generate revenues even at low oil prices.
According to a company presentation, ConocoPhillips’ (COP) break-even is the lowest among its peers. This means that at the current low oil price levels of ~$47, ConocoPhillips (COP) is still managing to make money.
The above chart shows that many of ConocoPhillips’ (COP) peers have break-even points in excess of $55. This means that these companies are already experiencing losses. That is, their oil price realizations aren’t breaking even.
ConocoPhillips (COP) is a component of key energy ETFs such as the Energy Select Sector SPDR (XLE), the Vanguard Energy ETF (VDE), the SPDR S&P Oil & Gas Exploration & Production ETF (XOP), and the Vanguard Total World Stock Index Fund (VT).
Geographical and project diversity may boost investor confidence
ConocoPhillips’ (COP) geographical and project diversity may also boost investor confidence. The company is investing across various opportunities and locations in order to capture value to capitalize on all points of the commodity cycle.
The company’s diverse business operations and unmatched access to low-cost oil resulted in a big competitive advantage last year.
ConocoPhillips (COP) could use this advantage to take over a weaker rival. This would increase the value of the company if oil prices rebound and rise in the future.
Watch this space for more analysis on ConocoPhillips (COP) after its earnings release.